CHAPTER 147

An Act to amend the Code of Virginia by adding in Title 88.1 thereof, a
chapter numbered 18, containing sections numbered 38.1-785 through
88.1-745, defining insurance premium finance companies; providing
for the licensing and regulation of such companies by the State
Corporation Commission, and the fixing by the Commission of charges
to be made by such companies; and to provide a penalty. rH 452]

Approved March 2, 1964

Be it enacted by the General Assembly of Virginia:
1. That the Code of Virginia be amended by adding in Title 38.1 thereof,
a chapter numbered 18, containing sections numbered 38.1-735 through
38.1-745, as follows:

CHAPTER 18.
INSURANCE PREMIUM FINANCE COMPANIES

§ 38.1-735. Any person, partnership or corporation (hereinafter
referred to as a “company’”’) engaged, in whole or in part, in financing
the cost of premiums for insurance on subjects of insurance resident,
located or to be performed in this State, or in acquiring agreements for
such financing from other insurance premium finance companies, shall
be an insurance premium finance company subject to the provisions
of this chapter, provided, however, that no company shall be deemed an
insurance premium finance company by reason of any transaction lawful
under the laws of this State without regard to the provisions of this
chapter. No bank, trust company, savings and loan association, industrial
loan association, credit union, small loan company licensed under Chapter
8 of Title 6 or insurance company shall be licensed under the provisions
of this Act, nor be subject to the restrictions and obligations imposed
by this Act.

§ 38.1-736. No insurance premium finance company shall engage in
the business of financing insurance premiums in this State until it has
obtained a license from the Commission as provided in this chapter.
Application for a license shall be made in writing, in the form prescribed
by the Commission, and shall be accompanied by an application fee of
one hundred dollars.

§ 38.1-737. Upon the filing of an application and the payment of
the application fee, the Commission shall make an investigation of each
application, and shall issue or deny a license within sixty days from the
date said application is filed and shall advise the applicant of its decision
thereon provided, however, that the Commission may extend the period
for issuing or denying an application by order reciting the reasons for the
extension. The Commission shall issue the license (expiring on December
31 of the calendar year of issuance) if it finds (1) that the application
is in proper form and that the required fee has been paid; (2) that the
financial responsibility, experience, character and general fitness of the
applicant, or of its members if the applicant be a co-partnership or
association, or of its officers and directors, if the applicant be a corporation,
are such as are calculated to command the confidence of the public and
to warrant belief that the business will be operated lawfully, honestly,
fairly and efficiently within the purpose of this chapter; (3) that the
applicant, if a corporation, is a Virginia Corporation or if a foreign
corporation that it has a certificate of authority to transact business in
Virginia; and, (4) that the applicant has available for the operation of
the business liquid assets sufficient for the conduct of the business that it
proposes to conduct in this State.
§ 38.1-738. Subject to the provisions of § 38.1-739 the holder of a
license under this chapter may renew such license from year to year,
as of the first day of January of each year, upon payment of an annual
license fee of one hundred dollars, unless such license is surrendered,
suspended or revoked. .

§ 38.1-739. The Commission may suspend, revoke or fail to renew
a license of any insurance premium finance company whenever it finds
that:

(1) The licensee has failed to pay the annual license fee or has
violated or failed to comply with any of the provisions of this chapter
or with any rule or regulation made by the Commission pursuant to this
chapter or with any demand, ruling, provision or requirement of the
Commission lawfully made pursuant to, or within the authority of, this
chapter; or

(2) The insurance premium finance company no longer meets the
standards required for the initial issuance of a license.

In lieu of revocation of license, the Commission may, as a condition
to maintenance of license, impose a penalty in an amount not exceeding
one thousand dollars for each violation of the laws of this State.

§ 38.1-740. The Commission shall investigate from time to time the
economic conditions and other factors relating to and affecting the business
of insurance premium finance companies and shall ascertain all pertinent
facts necessary to determine what maximum interest rate and what
service charge should be permitted. Upon the basis of such ascertained
facts and subject to the restrictions, provisions and limitations imposed by
this chapter, the Commission shall determine and fix by regulation or
order the maximum interest rate from the inception date or the last
renewal date of the insurance contract, which may be received in advance
upon the amount advanced by any insurance premium finance company
and the amount of the service charge referred to below. Such maximum
interest rate and the service charge shall be in such amount as will
induce efficiently managed commercial capital to be invested in such
business in sufficient amounts to make available adequate credit facilities
to persons seeking insurance premium financing and which will afford
those engaged in such business a fair and reasonable return on assets,
provided, however, that the Commission shall not fix any interest rate
In excess of a rate of one-half of one per centum for thirty days charged
in advance upon the entire amount advanced payable in installments.
Before determining or redetermining any such maximum interest rate
and service charge, the Commission shall give all licensees reasonable
notice and reasonable opportunity to be heard and introduce evidence with
respect thereto. In addition to the interest rate fixed by the Commission,
insurance premium finance companies shall be permitted to charge a
service charge which is initially fixed herein at ten dollars which need
not be refunded upon cancellation or prepayment. The Commission may
however as herein before provided redetermine the amount of such
service charge in accordance with the standards and procedure herein
fixed. Not more than one service charge shall be made for each premium
finance agreement, and no insurance agent or insurance premium finance
company shall induce any person to enter into more than one premium
finance agreement for the purpose of obtaining more than one service
charge. No part of any charges shall be paid to any insurance agent by
an insurance premium finance company.

§ 38.1-741. No form of premium finance agreement or any related
form used in this State by an insurance premium finance company shall
be used until it is approved by the Commissioner of Insurance and such
form shall contain no statements that are materially false or misleading
or omit statements necessary to prevent them from being in any material
way false or misleading.
§ 38.1-742. The Commission is empowered: (1) to examine the
books and records of an insurance premium finance company; (2) ta
require it to enter into bond with surety approved by the Commission
in the penalty determined as reasonable by the Commission conditioned
to protect its customers and the public in the manner required by law;
provided, however, that the aggregate liability of the surety for all
breaches of the conditions of the bond shall, in no event, exceed the penalty
of such bond, and that the surety on the bond shall have the right tc
cancel such bond upon thirty days’ notice in writing to the Commissioner
and thereafter shall be relieved of liability for any breach of condition
occurring after the effective date of said cancellation; and, (8) to estab-
lish rules and regulations with respect to the cancellation of policies of
insurance by insurance premium finance companies, the notice required
to be given the insured and the insurer, and the mutual obligations and
duties of insurance companies and insurance premium finance companies
with regard thereto.

§ 38.1-748. The Commission shall collect and turn into the State
treasury all license and other fees; and all amounts so collected and the
unexpended balances thereof may be used only for the payment of the
expenses of the administration of this chapter and of the performance of
other functions of the Bureau of Insurance of the Commission.

§ 38.1-744. Any person, partnership or corporation required to
obtain a license under this Act before engaging in the business of financing
insurance premiums which shall engage in such business in this State
without obtaining such license shall be liable to a fine of not more than
fifty dollars for each day such person, partnership or corporation shall
engage in such business without a license so to do, the fine to be imposed
and judgment entered therefor by the Commission after ten days notice
to the defendant by rule to show cause. This section shall become effective
ninety days after the effective date of the remainder of the Act.

§ 38.1-745. This chapter shall not apply to the inclusion of a charge
for insurance in a sale of property, goods or services payable in install-
ments, or in a loan made for purposes other than the financing of insur-
ance premiums only.